I don't find that one surprising at all...
I pretty quickly made the same determination myself when I looked at it...
There are a couple of prettier girls out there... a couple that seem likely to be a lot more fun... and no reason to hurry in offering any one of them a ring ?
It's pretty obvious, IMO, why SBSW would be reluctant to "diversify" away from the Stillwater Complex... to spend SBSW money to prove up a new prospect that's looking like its probably, at its best, less competitive than the alternatives ?
Because, "the decision" isn't simply about one option being the only... or the best... option available, only as it seems that it puts "location" checks in all the boxes... ? A lot of others out there seem they do that too ?
What are the other similar potentials out there that SBSW might be looking at ?
Its the same error you see junior mining promoters... and management... make all the time: overlooking the reality of a market full of alternative choices...
I usually keep a list of "near developers"... companies that have done all the work that needs doing to prove up a resource... They make the find, prove a resource, expand it over time, do the PEA... do the Feasibility Study... scoping studies... develop new extraction concepts... build pilot plants to provide proofs of concept, etc., even doing all the preliminary work required to prepare for and speed development along when "a decision" gets made... build the roads... build the mining camp, new airfields, provide power, etc... even actually beginning, starting in on doing the work of development, to lower the future costs, while claiming that's not what it is they're doing... as they're trying to lower the thresholds in costs and timelines... essentially, flagrantly showing a bit more cleavage than the other beauty contest participants...
And, then, they sit there in a group in a holding pattern with about two dozen others that have done all they can do, and all they need to do... so they sit there waiting to win, with all the checks in the box necessary to win that beauty contest and be declared the winner... But, being part of the contest isn't "winning" it ?
Some obviously aren't winning... because of obviously higher costs of production than the alternatives...or, because they've just not done as much as the others to prove what they have is "winning" caliber...
Others might have unique risk factors not being adequately addressed...
Others obviously aren't winning... in spite of lower costs... because to win the lower cost benefit, the scale of the project has so be so large that almost no one can write the check...
And, others still... just not willing to make a deal on the terms being offered... Financiers always think the rocks don't matter... they're just rocks... and its only the money that matters in making the business work. If your rocks are that good... that the financiers are wrong... you'll have to convince some other financier...
The "cost" aspects of and relative advantage in "location" are only one part of that ? It's got to be the right size, the right risk, the right place, and the right partner... when more than half of that is about the partner's needs, and their judgement about them, and not about your claim to meet them...
Given near identical advantages... things are still not ever close to equal ? One always makes more sense than another... either for winning the "location" beauty contest... or for other and unrelated reasons.... like... scope, scale, mine life... one just being bigger than another... having more intrinsic value in overlapping resource profiles, etc.
If you have two identical iron deposits... each sporting a nice 38% plus iron content... but, only one of them also happens to have a gram per ton of gold, along with some cobalt... and a portfolio of other esoteric minerals that add value ? Which will you choose to develop ?
And, then... its not all and only about the beauty contest, either... The guys running the beauty contest might not find it useful TO THEM to hold the contest on the timeline you find most advantageous...
Actually, they'll try to impose the opposite as a matter of routine... not that the judges in this contest are assumed to un-baised, so that they wouldn't be putting a bit of pressure on each of the contestants in a bid to to get a little something something on the side ?
And, still not a limit there... as the financiers aren't really operating in a vacuum, either... but have to consider their alternatives in investment options in a context that includes market timing concerns... So that waiting until its too late (in your view) is reduced to an art form... that generates advantages for them ?
Management and investors interests are intrinsically at odds in that degree... management wants to do a deal to make it happen... which requires doing a deal for pennies on the dollar... for less than the investors put into it to make it happen ? Investors want a payday... in which they get paid more than it cost to make the opportunity obvious enough someone else wants it ? Which one wins often depends more on the market than it does on what either one of them might actually prefer ?
Obviously, today, on the $ side, the best time to have done a deal... is more than two years ago... or in April of 2020 ?
And, for the investors... maybe the best time to make a deal... hasn't even arrived yet ?
Impatience has a cost... and so does too much patience... so, the best you can do is try to be on the right side of that in the picks that you do make.... ?
Usually... a management that's been there, done that... in having made deals that turned into mines before... is a pretty good thing to have... They'll tend to have properties with a lot more upside than advertised.... and not be caught selling shares at prices that imply value being fully priced... ? There is a cycle not different than the tech stocks... between the IPO at $35... and eventually proving up the tech, ten years later, when the stock is trading under $1... ? Knowing the market cycle... and the timelines on the issue in its dilution cycles... should keep you on the right side of the upside... ? |
